California’s Next Gold Rush

by Robert Turner

Where California goes, the world follows. Not only is California a global leader in the entertainment and technology industries but a less well-known fact is that it is one of the most diverse places for gambling in the world. The Golden State features 25 percent of the nation’s tribal gaming, a long-established horse racing industry, a state lottery, bingo halls and nearly a hundred card rooms. California has very much been a gambler’s paradise since the Gold Rush days. Its large population and huge appetite for everything gambling makes it the grand prize of the newly-regulated online gambling industry.

Amaya’s deal to purchase PokerStars was likely made with an eye to returning to a soon-to-be regulated U.S. market. Getting a foothold in California would be the key to success for any online gambling company. The California card room industry has been around for eighty years and made the transition from a very unsafe environment to the modern state-of-the-art gaming facilities of today. California’s highly-regulated gambling industry is a major employer and taxpayer in the state and is a model for what a regulated online gaming industry could look like.

The gaming industry in Los Angeles is showing signs of healthy growth with several large hotel projects in the works with the Bicycle Casino breaking ground this week on a new hotel slated for completion in October 2015 while the Commerce Casino is undertaking a major remodeling project. The Garden Casino in Hawaiian Gardens has also announced plans for a new casino, and Hollywood Park has been approved to build a whole new entertainment complex with a new casino.

Having worked in the California gaming industry for nearly 30 years, I have seen many changes in its development and expansion first-hand. I remember helping to clean up Gardena, which was a breeding ground for some of the top cheaters in the country at one time. I was there from the dark days of the Horseshoe Casino to the opening of Larry Flynt’s Hustler Casino in 2000. Visionaries like George Hardie transformed California gambling establishments from places filled with widespread cheating to the safe, regulated gambling market it is today. This did not happen overnight; it evolved over time.

Now California is on the brink of witnessing the largest expansion of gaming in U.S. history since the tribal gaming industry was made legal in 1987. That was the year the United States Supreme Court ruled in California v. Cabazon Band of Mission Indians that federally-recognized tribes could operate casinos outside state jurisdiction because the tribes were considered sovereign entities. The following year Congress passed the Indian Gaming Regulatory Act (IGRA) to establish the rules for the operation and regulation of Indian gaming. In 2012 Indian casinos in 28 states contributed 43% of all U.S. casino gaming revenue.

Once again California has a chance to shape gaming history by approving Internet gambling. If the state’s card rooms and tribes can resolve their differences over issues such as the bad actor clause or the problem of so-called “tainted assets,” then a bill could move forward.

A new twist was added to this story this week when the Iipay Nation of Santa Ysabel in California announced it was launching its own real-money online poker site called PrivateTable.com despite no regulatory framework being in place. David Vialpando, Chairman of the Santa Ysabel Gaming Commission, explains: “Santa Ysabel has a long history of successfully regulating Class II gaming in the Tribe’s brick and mortar casino, and looks forward to the opportunity to applying this experience in ensuring the integrity of the Tribe’s online poker enterprise. The launch of our website is the culmination of nearly two years of research and consultation with I-gaming platform providers, payment processors, and regulatory agencies around the world.”

The legality of this move remains to be seen, but what is certain is the battle has just begun for the Golden State’s online gambling business. Poker falls under Class II and is legal on sovereign land and needs no approval, which seems to be the loophole they are betting on. They probably reached the conclusion that they have nothing else to lose after they shut their casino this year owing over $50 million. It was built in 2007 with a $26 million primary loan from JP Morgan and a secondary loan of $7 million from the Apache nation. Its grand opening coincided with the 2007 San Diego wildfires. The recession of 2008 sealed the fate of the casino.

The line has been drawn between those tribes with megabucks and the smaller, less powerful tribes. It’s the old golden rule of gambling--those with the gold make all the rules--but Santa Ysabel’s move could very well change that dynamic. Only time will tell.

California gaming is going through a seismic shift, and the next five years will completely change the landscape. As has been the case in the past, California is leading the way to the future.

Robert Turner is a legendary poker player and casino marketing expert most well- known for introducing the game of Omaha poker to Nevada in 1982 and to California in 1986. He can be reached at robertturnerpoker@gmail.com